Voluntary Arrangement

[geoffb]

Hi have just taken a look at our competitors business at companies house, and have noticed that it now shows

Status: Voluntary Arrangement

I have read various guides on this, but I don't really understand it

Does this mean that they could be potentially going out of business ?

 

[Jenni384]

It means they are having problems and have entered a voluntary arrangement with their creditors:

http://www.companyrescue.co.uk/company-rescue/options/company-voluntary-arrangement

They are not necessarily going out of business; the idea of a VA is that it may help save the business from the problems it was having.

 

[Mike tells it like it is]

It often means they are paying back so much in the pound of what they owe.

It is often a last ditch attempt to avoid administration.

 

[Business News]

It usually means the business is sound but has hit cash flow problems and requires short term relief from creditor pressure.

Quite often it will derive from an inability to meet tax demands that have already been deferred. The tax man is quite compliant at accepting a ratio payment against dues which although it helps the company affected is a tad anti-competitive unless you, as their competitor, are also enjoying some degree of government support.

 

[chrisduckworth13]

They could have got into trouble for several reasons or cynically be enginnering not paying back all the debt they have accrued!!
Sometimes even good businesses hit rocky patches and the VA can be a good way of managing the debt typically through paying say 40 to 50% back over 3 to 5 years!
Hope this helps!

 

[Alan R Price]

A company voluntary arrangement ("CVA") is a scheme of arrangement or composition of a company's debts usually with the intention of saving it and its business as a going concern. It is essentially a contract with creditors that provides for their debts to be paid in full, or for part-payment in full and final settlement of those debts over a period of time - often five years. A CVA is usually appropriate where a company has made unexpected losses through bad debts or loss of market share/customers but is expected to recover. In some cases the management may have made mistakes that have now been addressed but the company needs time to see the benefit of changes made to structure, business practices etc.

A company must be insolvent before it can be put into a CVA. A formal proposal is sent to creditors outlining how the CVA will work and the creditors vote on it at a meeting convened by an insolvency practitioner for that purpose. If 75% in value voting at the meeting vote in favour, the CVA is approved and all creditors are bound by it, whether they voted or not. Once a company is in a CVA none of its creditors can sue it, send in a bailiff or present a winding-up petition for a pre-CVA debt. The CVA is administered by an IP known as the supervisor although the directors remain in control of the company's business and finances.

A CVA is usually a better alternative for creditors than liquidation, which is normally the only other option, because it should produce a much better return for them. It also preserves jobs and shareholders' investments; and gives suppliers the opportunity to trade with the business in the future.